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Test your basic knowledge |
AP Microeconomics
Start Test
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Entry of new firms shifts the cost curves for all firms downward
Natural Monopoly
Decreasing Cost industry
Derived Demand
Oligopoly
2. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Perfect competition
Normal Goods
Monopoly long-run equilibrium
Marginal Benefit (MB)
3. Ei > 1
Luxury
Perfectly elastic
Monopoly long-run equilibrium
Economic Growth
4. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Economies of Scale
Decreasing Cost industry
Four-firm concentration ratio
Private goods
5. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Marginal Resource Cost (MRC)
Surplus
Total Welfare
Profit Maximizing Rule
6. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Normal Goods
Perfectly competitive long-run equilibrium
Price Elasticity of Supply
Market Equilibrium
7. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Implicit costs
Non-collusive oligopoly
Dead Weight Loss
Monopoly
8. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Positive externality
Allocative Efficiency
Monopolistic competition
Marginal tax rate
9. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Constant cost industry
Perfectly inelastic
Surplus
Marginal Productivity Theory
10. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Diseconomies of Scale
Subsidy
Luxury
Total Revenue Test
11. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Monopoly
Total Revenue
Marginal Resource Cost (MRC)
Explicit costs
12. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Variable inputs
Relative Prices
Law of Demand
Marginal Revenue Product (MRP)
13. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Monopolistic competition long-run equilibrium
Income Elasticity
Dead Weight Loss
Relative Prices
14. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Free-Rider Problem
Specialization
Public goods
Complementary Goods
15. When firms focus their resources on production of goods for which they have comparative advantage
Incidence of Tax
Specialization
Monopolistic competition
Price floor
16. Exists if a producer can produce more of a good than all other producers
Marginal Resource Cost (MRC)
Absolute Advantage
Dead Weight Loss
Derived Demand
17. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Marginal Product of Labor (MPL)
Excise Tax
Price Ceiling
Constrained Utility Maximization
18. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Dead Weight Loss
Marginal Analysis
Producer surplus
Implicit costs
19. Ed = 8 - infinite change in demand to price change
Economics
Law of Supply
Perfectly elastic
Law of Diminishing Marginal Utility
20. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Price discrimination
Total variable costs (TVC)
Price elasticity
Perfect competition
21. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Average Total Cost (ATC)
Determinants of Demand
Price Ceiling
Law of Diminishing Marginal Utility
22. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Variable inputs
Producer surplus
Law of Supply
Demand for Labor
23. Ed = (%dQd)/(%dP). Ignore negative sign
Cross-Price Elasticity of Demand
Price elasticity
Marginal Analysis
Total Product of Labor (TPL)
24. Ed = 0 - no response to price change
Positive externality
Fixed inputs
Perfectly inelastic
Price Ceiling
25. The ability to set the price above the perfectly competitive level
Marginal Resource Cost (MRC)
Determinants of Demand
Economics
Market power
26. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Private goods
Public goods
Economics
Free-Rider Problem
27. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Least-Cost Rule
Necessity
Shutdown Point
Marginal Benefit (MB)
28. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Variable inputs
Collusive oligopoly
Explicit costs
Price inelastic demand
29. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Spillover costs
Utility Maximizing Rule
Constrained Utility Maximization
Normal Profit
30. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Short run
Substitute Goods
Luxury
Marginal Product of Labor (MPL)
31. The imbalance between limited productive resources and unlimited human wants
Average Product of Labor (APL)
Price elasticity
Scarcity
Least-Cost Rule
32. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Perfectly inelastic
Marginal Revenue Product (MRP)
Dead Weight Loss
Determinants of elasticity
33. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Shutdown Point
Cross-Price Elasticity of Demand
Average Variable Cost (AVC)
Public goods
34. 0 < Ei < 1
Absolute prices
Necessity
Surplus
Profit Maximizing Resource Employment
35. Ei = (%dQd good X)/(%d Income)
Excise Tax
Income Elasticity
Inferior Goods
Public goods
36. Ed = 1
Market Equilibrium
Resources
Allocative Efficiency
Unit elastic demand
37. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Subsidy
Resources
Law of Increasing Costs
Least-Cost Rule
38. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Price floor
Law of Increasing Costs
Surplus
Constant cost industry
39. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Determinants of elasticity
Diseconomies of Scale
Marginal Revenue Product (MRP)
Derived Demand
40. Costs that change with the level of output. If output is zero - so are TVCs.
Price Elasticity of Supply
Normal Profit
Total variable costs (TVC)
Total Product of Labor (TPL)
41. The total quantity - or total output of a good produced at each quantity of labor employed
Spillover costs
Law of Increasing Costs
Constrained Utility Maximization
Total Product of Labor (TPL)
42. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Spillover costs
Perfectly elastic
Determinants of elasticity
Monopolistic competition
43. The output where ATC is minimized and economic profit is zero
Constrained Utility Maximization
Total Product of Labor (TPL)
Break-even Point
Monopsonist
44. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Constant Returns to Scale
Economies of Scale
Surplus
Monopsonist
45. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Variable inputs
Public goods
Law of Diminishing Marginal Utility
Consumer surplus
46. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Determinants of elasticity
Marginal Cost (MC)
Diseconomies of Scale
Marginal Revenue Product (MRP)
47. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Spillover costs
Total Fixed Costs (TFC)
Marginal Resource Cost (MRC)
Negative externality
48. Entry of new firms shifts the cost curves for all firms upward
Monopolistic competition long-run equilibrium
Cartel
Increasing Cost Industry
Profit Maximizing Rule
49. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Total Fixed Costs (TFC)
Price elasticity
Income Effect
Substitute Goods
50. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Perfect competition
Shutdown Point
Price inelastic demand
Determinants of Demand